TECHNICAL NOTES
Labor Hours: Hours data for the labor productivity and cost measures
include hours for all persons working in the sector--wage and salary
workers, the self-employed and unpaid family workers. The primary
source of hours and employment data is the BLS Current Employment
Statistics (CES) program, which provides monthly survey data on the
number of jobs held by wage and salary workers in nonfarm
establishments. The CES also provides average weekly paid hours of
production and nonsupervisory workers in these establishments. Weekly
paid hours are adjusted to hours at work using data from the National
Compensation Survey (NCS). The BLS Hours at Work survey, conducted
for this purpose, was used for earlier years. The Office of
Productivity and Technology estimates average weekly hours at work
for nonproduction and supervisory workers using information from the
Current Population Survey (CPS), the CES, and the NCS.
Data from the CPS are used for farm labor, nonfarm proprietors,
and nonfarm unpaid family workers. Estimates of labor input for
government enterprises are derived from the CPS, the CES, and the
National Income and Product Accounts (NIPA) prepared by the Bureau of
Economic Analysis (BEA) of the Department of Commerce.
The CES measures jobs, counting a person who is employed by two
or more establishments at each place of employment. In contrast, the
CPS features measures of employment that count each person only once
and classify each person according to his or her primary job; hours
worked at all jobs by that person accrue to his or her primary job.
However, the CPS also collects more detailed information on
employment and hours worked at primary jobs and all other jobs,
separately. The BLS productivity measures use the more detailed
information on employment and hours to assign all hours worked to the
correct industrial sector and avoid duplicating hours data from the
CES.
Output: Business sector output is a chain-type, current-weighted
index constructed after excluding from gross domestic product (GDP)
the following outputs: general government, nonprofit institutions,
and private households (including owner-occupied housing).
Corresponding exclusions also are made in labor inputs. Business
output accounted for about 75 percent of the value of GDP in 2012.
Nonfarm business, which excludes farming, accounted for about 74
percent of GDP in 2012.
Annual indexes for manufacturing and its durable and nondurable
goods components are constructed by deflating current-dollar industry
value of production data from the U.S. Bureau of the Census with
deflators from the BLS. These deflators are based on data from the
BLS producer price program and other sources. The industry shipments
are aggregated using annual weights, and intrasector transactions are
removed. Quarterly manufacturing output measures are based on the
index of industrial production prepared monthly by the Board of
Governors of the Federal Reserve System, adjusted to be consistent
with annual indexes of manufacturing sector output prepared by BLS.
Durables include the following 3-digit NAICS industries: wood product
manufacturing; nonmetallic mineral product manufacturing; primary
metal manufacturing; fabricated metal product manufacturing;
machinery manufacturing; computer and electronic product
manufacturing; electrical equipment and appliance manufacturing;
transportation equipment manufacturing; furniture and related product
manufacturing; and miscellaneous manufacturing. Nondurables include:
food manufacturing; beverage and tobacco product manufacturing;
textile mills; textile product mills; apparel manufacturing; leather
and allied product manufacturing; paper manufacturing; printing and
related support activities; petroleum and coal products
manufacturing; chemical manufacturing; and plastics and rubber
products manufacturing.
Nonfinancial corporate output is a chain-type, current-weighted
index calculated on the basis of the costs incurred and the incomes
earned from production. The output measure excludes the following
outputs from GDP: general government; nonprofit institutions; private
households; unincorporated business; and those corporations
classified as offices of bank holding companies, offices of other
holding companies, or offices in the finance and insurance sector.
Nonfinancial corporations accounted for about 49 percent of the value
of GDP in 2012.
Productivity: These productivity measures describe the relationship
between real output and the labor time involved in its production.
They show the changes from period to period in the amount of goods
and services produced per hour. Although these measures relate output
to hours at work of all persons engaged in a sector, they do not
measure the specific contribution of labor, capital, or any other
factor of production. Rather, they reflect the joint effects of many
influences, including changes in technology; capital investment;
level of output; utilization of capacity, energy, and materials; the
organization of production; managerial skill; and the characteristics
and effort of the work force.
Labor Compensation: The measure includes accrued wages and salaries,
supplements, employer contributions to employee benefit plans, and
taxes. Estimates of labor compensation by major sector, required for
measures of hourly compensation and unit labor costs, are based
primarily on employee compensation data from the NIPA, prepared by
the BEA. The compensation of employees in general government,
nonprofit institutions and private households are subtracted from
compensation of domestic employees to derive employee compensation
for the business sector. The labor compensation of proprietors cannot
be explicitly identified and must be estimated. This is done by
assuming that proprietors have the same hourly compensation as
employees in the same sector. The quarterly labor productivity and
cost measures do not contain estimates of compensation for unpaid
family workers.
Unit Labor Costs: The measures of unit labor costs in this release
describe the relationship between compensation per hour and
productivity, or real output per hour, and can be used as an
indicator of inflationary pressure on producers. Increases in hourly
compensation increase unit labor costs; labor productivity increases
offset compensation increases and lower unit labor costs.
Presentation of the data: The quarterly data in this release are
presented in three ways: as percent changes from the previous quarter
presented at a compound annual rate, as percent changes from the
corresponding quarter of the previous year, and as index number
series where 2009=100. Annual data are presented both as index number
series and percent changes from the previous year.
The index numbers and rates of change reported in the
productivity and costs news release are rounded to one decimal place.
All percent changes in this release and on the BLS web site are
calculated using index numbers to three decimal places. These index
numbers are available at the BLS web site, www.bls.gov/data/home.htm,
or by contacting the BLS Division of Major Sector Productivity.
(Telephone 202-691-5606 or email DPRWEB@BLS.GOV)
Information in this release will be made available to sensory-impaired
individuals upon request. Voice phone: 202-691-5606; Federal Relay Service
number: 1-800-877-8339.

SOURCES: Output data are from the Bureau of Economic Analysis and the
Census Bureau of the U.S. Department of Commerce; the Bureau of Labor
Statistics, U.S. Department of Labor; and the Federal Reserve Board.
Hours and compensation data are from the Bureau of Labor Statistics and
the Bureau of Economic Analysis.
RELIABILITY: Productivity and cost measures are regularly revised as more
complete information becomes available. The measures are first published
within 40 days of the close of the reference period; revisions appear 30
days later, and second revisions after an additional 60 days. In the
business sector, the third publication (second revision) of a quarterly
index of output per hour of all persons has differed from the initial
value by between -1.6 and 1.5 index points approximately 95 percent of the
time. This interval is based on the performance of this measure between
the fourth quarter of 1995 and the third quarter of 2013.
Table Footnotes
(1) Wages and salaries of employees plus employers' contributions for
social insurance and private benefit plans. Except for nonfinancial
corporations, where there are no self-employed, data also include an
estimate of wages, salaries, and supplemental payments for the self-
employed.
(2) The change for recent quarters is based on the Consumer Price Index
for all urban consumers (CPI-U). The trend from 1978-2012 is based on the
Consumer Price Index research series (CPI-U-RS).
(3) Unit nonlabor payments include profits, consumption of fixed capital,
taxes on production and imports less subsidies, net interest and
miscellaneous payments, business current transfer payments, rental income
of persons, and the current surplus of government enterprises.
(4) Current dollar output divided by the output index.
(5) Quarterly changes: Percent change compounded at annual rate is
calculated using index numbers to three decimal places. Indexes published
in the news release are rounded to one decimal place for convenience.
Annual changes: Percent change is calculated using annual indexes to
three decimal places.
(6) Unit nonlabor costs include consumption of fixed capital, taxes on
production and imports less subsidies, net interest and miscellaneous
payments, and business current transfer payments.
(7) Total unit costs are the sum of unit labor and nonlabor costs.
(8) Unit profits include corporate profits before tax with inventory
valuation and capital consumption adjustments.